Jaguar Land Rover’s multi-billion pound investment in green automotive technology could be the trump card that secures Treasury backing for a government support package, insiders have told the Birmingham Post.

Talks between officials and the luxury carmaker’s Indian owner Tata almost stalled in the days before Christmas when the Government refused to put in place short-term finance to tide the firm over into the New Year. Tata eventually found the necessary cash, which will keep it going until the end of January, it is understood.

Now full negotiations are due to resume next week around a longer-term strategic support package, with Treasury officials insisting that ‘due diligence’ be carried out on Tata’s complex corporate structure before the deal can finally be signed off.

Sources close to the negotiations between the company and the Government have indicated there is high level political support for intervention to help keep one of the country’s biggest investors in automotive technology and sustainable industry afloat during the credit crunch.

But the Treasury will have to be persuaded that a package for JLR will not set a precedent, leading to other UK-based manufacturers turning to the government for similar aid.

So far, JLR is the only company to have done so.

And the signs are that the Government could swing behind JLR on the grounds that the company is the seventh biggest single investor in research and development of any kind in the UK and is investing up to £3 billion in a new generation of highly fuel efficient, low-emission cars.

Meanwhile, Prof David Bailey, director of Birmingham Business School and an automotive industry specialist, hit back at critics of state-aid for JLR. In a Post website blog, he said neither JLR nor Tata were asking the Government for a “bail-out”, as many commentators have said, but a loan, or loan guarantee, at commercial rates to “enable them “to get on with developing and making high quality cars”.

“The argument is about access to finance and guarantees at commercial rates given that the (heavily subsidised) banking system now seems unable to do the job properly.

“And the cast list of people lining up to argue in favour of this intervention on commercial terms includes very respected figures like Lord Bhattacharyya, head of the Warwick Manufacturing Group, and CBI director-general Richard Lambert.”

Prof Bailey goes on to point out that some opponents of intervention also call for public funds to be used to finance the development of new green technologies.

“Yet this is, in fact, exactly what JLR are doing in developing hybrid engines and lightweight composite materials, especially for the LRX concept car.

“Indeed, JLR accounts for as much as 50 per cent of all R&D (more than £400m a year) spend in the UK auto industry, so if you really want to green the industry the place to do it is by supporting JLR which is working with suppliers and universities to cut carbon emissions.”

Prof Bailey went on to stress that the collapse of JLR would not only rob the country of a key position in the development of green technologies but would also cost the Exchequer the equivalent of up to 40 per cent of the company’s turnover in lost tax, VAT, national insurance contributions and unemployment benefits.”

Meanwhile, Jaguar yesterday unveiled the new XF Diesel S, its “most advanced, powerful and efficent” diesel ever, with average fuel consumption of 42mpg and CO2 emissions of 179g/km.

* Read David Bailey's original blog post: "Jaguar Land Rover: It's NOT a bail-out, we're running out of time, and the costs of inaction could be huge."

* The Birmingham Post says that Government should save Jaguar Land Rover - let us know your opinion on our News Blog.